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Blockchain Partnership event held at Digital Catapult Centre, London, 26 April 2016. Flickr/gdsteam. Some rights reserved.At this moment
there is a technology under development that many
forecast will have an equally fundamental impact on how we do things as the
Internet itself.

But instead of facilitating
the circulation of information, this technology changes the very way that information
is agreed on and verified as true and how such a ‘truth’
might be enforced. The two areas that this technology is poised to have the
largest transformative effects on are finance and government – the very way
that money and democracy operate. The technology is called the blockchain.

After a short
introduction to the blockchain for the new reader, the purpose of this piece is
threefold: first, to emphasise that there is no inevitable way in which
technology develops, but that it is shaped by conscious or unconscious
decisions made between differing possibilities; secondly that such decision-making
is an important moment in determining our social and political future; and
finally, to introduce some tools for making sense of, understanding and acting
within this whirling new field.

A (very brief) explanation
of the blockchain

The blockchain
rose to fame initially as part of the Bitcoin cryptocurrency and is the
computational process that allows for a network of computers to come to an
agreement about the state of transactions, without needing a central authority
like a bank to guarantee security or prevent double-spending.

The blockchain
is a linear chain of blocks of data – for example, information about
transactions that have occurred – which is validated through a computational
competition (in the case of Bitcoin this is called mining). Participation in
the network is governed by a set of protocols implementing economic incentives
to reward those acting in favour of the network and punish those trying to
impede its function.

The blockchain
has in the past couple of years seen new developments beyond digital currencies
and is being applied to many other areas: from the Internet of Things (cf. Slockit) to domain name registries (cf. Namecoin), including systems for governance
(cf. Backfeed). These efforts often have a
stated intention of decentralising or disintermediating existing
processes, by replacing institutional or industrial authority with networked
computing, thereby translating existing legal, financial and political
processes into technical code such as self-executing smart contracts.

Grounded in
cryptography, the network is very unlikely to be controlled by any single
entity or central authority, which enables a practically immutable and
censorship-resistant public ledger and computing platform. While such new
elements — machines, algorithms, fibre-optics, developers, engineers, investors
with new forms of agency and control — are being introduced into or even
replacing institutional processes, little is understood about where and how control
and power shifts in the process.

Disintermediation

For many, the
attraction of the blockchain is thus the promise of disintermediation: getting
rid of middlemen who act as authoritative gatekeepers or increase cost without
adding value. It is an attractive prospect, especially in our current context
of endemic corruption amongst the political and financial elites and a
generalised feeling of powerlessness and anger.

The blockchain
represents a promise for you to be able to determine your own governance
system, your own legal structure and create your own money, and to do so in a
manner that is interoperable with others who are doing the same thing across
the world. Does this not sound like freedom? Does this not mean autonomy and
independence? Surely that can only be a good thing?

Unfortunately,
it's not necessarily so. If you download and start using, say, a Bitcoin
wallet, it is likely that it will display the current value of Bitcoins in
dollars. This is a first, and very simple example of the interdependencies of
systems, demonstrating that the dollar, and currency exchange markets more
generally, have a very real impact on the perceived value of your Bitcoin and
thus what you can or cannot do with it. Even cryptocurrencies exist within geo-political
contexts and do not necessarily guarantee liberation from these, so long as
their value are dependent on and related to the same exchange markets.

Let's take
another slightly more complex example that most people familiar with the
blockchain and Bitcoin will have come across: the ongoing dispute about
block-sizes in the Bitcoin blockchain.

For the
unfamiliar reader, here is a brief summary:

In the core
code of Bitcoin there is a limitation on the data-size of each block of
transactions in the blockchain. In 2015, a worry started to spread that this
limitation was slowing down or even inhibiting the validation of transactions,
in other words that the blocks were “filling up”. A suggestion was made to
increase the block size, which was in
turn refused by a significant part of the network and resulted in the
exiting of one
of the core developers[1].
The dispute could be represented as two very different notions of
decentralisation: on the one hand, increasing the blocksize might allow for
more rapid validation of transactions and therefore a spread in the usability
of the currency. Yet on the other hand, it would radically increase the
computational power needed to validate transactions, meaning the bar for
participation within the network that validates transactions and runs full
nodes would become prohibitively high, centralising the computing – and thus
political power – in the network.

This dispute
represents two very different visions for how and for whom Bitcoin should
develop – as a digital money service provider competing with Visa, Mastercard
and Paypal, or as an entirely new and emergent way of understanding and governing
value, with priority given to widespread participation in the governance and
evolution of the network. Does the limit of block sizes constitute a problem or
does it safeguard against infrastructural centralisation?

The dispute
remains unresolved and has resulted in a hardfork[2]
in the Bitcoin network, with nodes running different versions of the core code.
Thus a technical decision about modifying one aspect of the core code has in
one sweep demonstrated that politics (the political understood as the
negotiation over mutually incompatible interests) is not eradicated by
replacing institutions with a technical system. It has merely shifted the
decision-making process from a parliament or central bank to git[3]
and the bedrooms, incubators or offices of developers.

In other words,
rather than disintermediation, it might be more accurate to say that there is a
radical process of reintermediation, the introduction of,
literally, new media in which for example voting is replaced by nodes
forking bits of code and the legal system replaced by self-executing smart
contracts.

Admittedly, reintermediationis a clunky
concept and does not allow us to understand what exactly changes when, for
example, a bureaucratic, legal or political process is replaced by code and
algorithms. So let's explore some concepts that might be more helpful...

“Delegation”

Despite their
ubiquitous presence in our everyday lives, technology development and devices
are still understood as things that operate under objective laws of physics and
engineering, rather than being manifestations of interests, drives and desires
of humans. Delegation can be a helpful concept in helping us think about how
technology relates to politics and power dynamics as a whole.

The concept of ‘delegation’
is introduced in Bruno Latour’s 1992 text on “mundane artifacts” where he
discusses the automatic door closer in an office. In this simple example, a
decision is made in an office that it is good and desirable for the door to
remain closed. This position, which might or might not be disputed by others in
the office, is encoded in and delegated to the door closer, which
henceforth proactively enforces this decision. Repeated negotiations, reminders
or arguments amongst office workers are thus eliminated by this simple device,
shifting the question of whether the door should be open or closed out of the
realm of contestation.

While the
decision of a door needing to remain closed might seem an insignificant and
mundane example, it serves as a way of understanding what happens when more
complex questions are encoded in technology.

The political,
understood as continuous negotiation between potentially incompatible
positions, is resolved once and then encoded in and delegated to the
technology, after which a given process is rendered apolitical. Contestation in
the process of innovation is therefore not simply the imposition of limits, but
is an important aspect of the shaping of a given technology, which might be
enacting a function for the benefit of one social group or another.

The concept of
delegation allows us to ask the right questions when developing new forms of
blockchain-based decentralised (self)governance on a potentially global scale.
What processes, actions and decisions should be delegated to and encoded in
blockchain technology? Which functions should instead be delegated to institutional
processes or social situations that keep the possibility for contestation open?

"Transmutation"
and the collapse of time, space and ambiguity into binary execution

The concept of
delegation might be helpful for understanding how political and ethical
positions are encoded in and enforced by technological devices, but it does not
describe the qualitative shift that also happens when such new technology,
mediums and mediators are introduced.

Literary
theorist Kathrine
Hayles writes about the shifts and intermediations that take place in the
relationship between code, writing and speech, elaborating on a central point
made by Alexander Galloway,
that code can be understood as the first language which is executive. In other
words, code enacts and executes continuously and proactively rather than
retroactively. For Lessig
this meant that code is law.

However,
technical and legal regulation operate very differently so we cannot simply say
law has been rewritten as code. Code also entails enforcement, the police, or
even more accurately, code might be understood as architecture: a space where
your options are prebuilt and continuously, yet subtly, entice or inhibit
specific actions and movements. While law is enforced after the fact and has
spatial, temporal and interpretive grey scales in its implementation and
enforcement, technical code on the other hand allows and disallows continuously
and in a binary fashion, representing an immense transmutation.

The new fields
of innovation that the blockchain has inspired such as FinTech and RegTech (GovTech
or DemTech will probably be next to appear)
are not simply the solving of technical problems, complying with metrics of
efficiency only, but also entail fundamental changes to the implementation,
enforcement and execution of law and governance as a whole.

And to add
another facet to this transformation, we might want to consider the spatial and
temporal transmutations that such shifts also entail, in which a process that
normally took place between, say, parliament where regulation is shaped, the
streets where a crime might take place, the police cell, the court room etc.
each stage including multiple forms of negotiation of power, relationships,
norms and plenty of other variables, are all collapsed into a binary moment.

Thinking about
how such changes alter the role of time and space in these processes helps to
illustrate the profound shift that is under way.

Attention to
this shift begs a further question: what types of decisions and regulations are
suitable to be encoded in a binary manner and proactively enforced? Especially
given that the particular architecture in question is bulwarked with
cryptography and therefore extremely hard, nearly impossible to retrospectively
alter.

"Complexity" and
the dawn of the Nerd Reich

Let's now go
back to the door closer: in terms of power dynamics, there is an important
difference between the door closer and the blockchain – the level of
complexity. The office worker can always block the door with a heavy object to
keep it open, or even pick apart the not very sophisticated device with a
simple screwdriver.

The blockchain
on the other hand is designed to be irreversible, using cryptography to be
tamper-proof and is extremely complex, making it very difficult for the vast
majority of people to understand what is at stake in its design and
implementation stages, let alone to intervene or modify the system once it is
in place. The extreme level of complexity of the blockchain, not to mention the
many layers of infrastructure, power and supply chains on which it is
dependent, contributes to creating new forms of elites, evangelising
while also constituting the very small group of people who fully understand and
can modify the system.

In other words, the supposed “trustless” systems of
blockchain innovations might be better understood as a shift of trust from one
realm and set of processes to another, requiring an immense trust in
cryptography, hardware, the ongoing availability of electricity and raw
materials and, of course, in the decisions made by the evangelists of
the nerd Reich themselves. While Bitcoin existed
as a project amongst a
community of people who participated and tinkered with the system themselves, trustless
and disintermediation might have had some validity, but as a technology for
widespread implementation in finance and government, questions of complexity,
control, oversight and participation become urgent.

The Nerd Reich delusion

It is tempting, after all of the above, to assume that
the Nerds are in the process of ascending to spiralling heights of power, that
they're becoming responsible for our collective political and economic futures.
And while indeed, developers and engineers should be (and indeed
many are) attentive to the social
and political assumptions they are building into
these systems, their development does
not exist and thrive in a vacuum, but is supported and encouraged through
funding, marketing and regulation.

This is why some projects that seek to go against the
grain and propose alternatives come across as overtly political, while others
are understood as neutral: because the latter bear within them implicit
assumptions, assumptions about human behaviour or values that
are widespread and continuously re-enforced, such as market-based
incentives to encourage or punish
behaviour in the system. On
the other hand, one of the most interesting aspects of blockchain development
is exactly that other values can be encoded into these systems.

Blockchain technology is not being developed in a
vacuum or on a tabula rasa in which a Nerd
Reich can finally create sci-fi utopias for us all - unfortunately
(or fortunately) existing contexts, power dynamics and inequalities affect what
is made possible or not, and in whose interest.

The text is #1 in a series called
BlockBusters, edited in collaboration with Elias Haase of B9Lab, introducing helpful concepts
for navigating the politics of the emerging blockchain landscape.
Catch
Jaya and Elias at Re:Publica in Berlin this week, at the session
The
blockchain: a crash course and challenging consensus.

Thanks to Vinay Gupta for the
term “Nerd Reich”.

Some further reading:

Chantal Mouffe 2005. On the Political. Routledge

N. Kathrine Hayles 2005. My Mother Was A Computer. University of Chicago Press

[2] A hardfork refers to
when a change is implemented in the code that diverges from and is incompatible
with the previous version, entailing a fork and thus two (or more) different
versions in operation.

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